Consolidation on Aisle Five: Effects of Mergers in Consumer Packaged Goods

Abstract

We study the effects of the average merger in the consumer packaged goods industry, a sector making up over 10% of US GDP. Using an event-study design and linked retail scanner data from hundreds of consummated mergers, we find that mergers raise prices at the target by 0.9%. Under nested CES demand, we provide sufficient statistics to recover average consumer welfare effects as a function of effects on price, store and product availability, and firm exit. Accounting for availability and exit is quantitatively important. The decline in consumer welfare is equivalent to a 1.9-3.7% price increase at the target firm.

Keywords: Mergers, horizontal mergers, antitrust

JEL Classification: L41